Stanford snags record $150 million donation for poverty center

(Poets&Quants) — Stanford’s Graduate School of Business has long been one of the few business schools in the world that has regularly turned out its fair share of social entrepreneurs. Now it may well become the B-school for global social enterprise.

An unprecedented $150 million gift — the largest in the business school’s history — will be used to create a new institute whose goal is to combat poverty around the world. The money and the new Stanford Institute for Innovation in Developing Economies propels the B-school — a place better known for producing investment bankers, consultants, and entrepreneurs — into the forefront of a growing movement to alleviate poverty through non-profit and for-profit social enterprises.

A key component of the effort will be what Stanford is calling an “on-the-ground” initiative to help social entrepreneurs develop organizations that make products and services to help the poor. “It’s not just a think tank. It’s going to transform lives,” said Robert E. King, a 1960 Stanford Business School alum, who made the gift with his wife, Dorothy.

The institute will teach and support students to create organizations similar to one launched by Daniel Spitzer, a Stanford MBA, who started a venture that grows hazelnut trees in Bhutan. The for-profit company, Mountain Hazelnut Venture Ltd., hopes to produce some 40,000 tons of hazelnuts, giving local farmers a lucrative export product and restoring trees to mountainsides stripped by logging.

“More than a billion people live on less than $1.25 a day,” said King. “That’s just not right.” King, 76, is the founder of Peninsula Capital in Menlo Park, Calif., and an early investor in Chinese Internet search company Baidu (BIDU).

The gift is among the largest ever for a business school and the biggest since David Booth gave $300 million in 2008 to what is now known as University of Chicago Booth School of Business. In 2006, Stanford’s business school received a $105 million gift from Nike Inc. (nke) co-founder Philip Knight to help construct its new campus, which formally opened earlier this year.

The extraordinary size of the gift and its support of a purpose generally not considered in the mainstream of business school study should help establish Stanford as the world’s leading business school for social enterprise. For years, U.S. News’ rankings of the best business schools for non-profits have put Yale University’s School of Management first and Stanford second. The gift stands to make the school the undisputed world leader in this area.

Hau Lee, a Stanford professor who teaches supply chain management and was named the leader of the new institute, concedes the size and ambition of the gift “is a little overwhelming.” But the school is already searching for three new faculty members with deep expertise in developing economies to scale up its efforts in this area. Lee said he hopes to have them on board as early as next September.

“The majority of our graduates and most business schools will focus on consulting firms and multinational companies, but the entrepreneurial spirit we try to instill in our students can steer some — a small percentage — to work with local entrepreneurs for the betterment of the under-served economies,” says Lee. “That trend is happening. In the last couple of years, we have seen our own graduates go to India and other countries to build companies in irrigation systems and water purification. We hope this accelerates.”

The idea for the gift apparently came out of home stays that the founding donors have offered to international students at Stanford for more than four decades. They witnessed first-hand the impact that education and entrepreneurship can have at both an individual level and a larger scale. One student, Xiangmin Cui, PhD ’97, introduced King to his friend Eric Xu, who joined web engineer Robin Li to launch a Chinese-language search engine.

After that meeting, King provided seed funding to Baidu, which now employs more than 10,000 people in China. Another King home-stay student — Andreata Muforo from Zimbabwe, who graduated with an MBA from Stanford in 2009 — brought peers from her global study trip to Africa to the King’s home for dinner. “We heard how those first-hand experiences compelled some of the MBAs to return for internships in Africa,” said “Dottie” King. “We saw the direct connection between the learning experience and the motivation to make change.”

“We believe that innovation and entrepreneurship are the engines of growth to lift people out of poverty,” added King in a statement.

Of the $150 million gift, $100 million will fund the Institute. The remaining $50 million will be used to match other donors who contribute still more money to fuel Stanford’s commitment to alleviating poverty, bringing the total philanthropic investment to potentially $200 million.